What is a credit ?: concept and most common loan types

According to the Wikipedia definition, a credit (from the Latin credititus , substantiation of the credere , to believe) is a banking operation by which the bank , in an act of trust, makes available to the client a certain amount of money to be repaid, with interest , within the term agreed by contract. To request it in a bank it is necessary to have a credit account or a card.

 

 There are several types of loans , which vary depending on the needs of each client, as well as the method of return or your request:

Image result for different types

 

  • Traditional. Contemplate one foot and a number of installments to be agreed upon.
  • To the consumption. Normally in the medium or short term, this type of credit serves to cover the acquisition of goods or payment of services.
  • Commercial. Focused on companies in order to make payments, acquire goods or to refinance debts with other institutions and short-term suppliers.
  • Mortgage Amount lent by a bank to an individual to acquire land or housing for a specific period of time that usually ranges between 8 and 40 years. Normally the average figure is 20 years.
  • Consolidated. It allows regrouping all the credits of a person into one, so that the periodic fee will be less than the installments of the loans separately. However, this also extends the credit term as well as the interest rate applied.
  • Personal. Focused on consumer spending, it requires the commitment of the client, who must certify the future return of the loan, and normally one or two more guarantors. The repayment terms are broader and are usually established based on the client’s preferences.
  • Prendario Credit granted against a guarantee that is usually a thing of value or a property. This asset will be placed in the entity, which may settle the debt through its sale or commercialization, in case the client is unable to pay the total amount of the loan.
  • Mini loans or quick credits: they consist of small amounts, ranging between 100 and 600 euros and that can be requested in a short space of time and without many demands by the lender company. They are designed for specific emergencies, since the interests are usually very high.
  • P2P loans. As the name indicates, this type of loan is designed for those who seek to obtain liquidity from another individual without going through a bank. One of the main advantages is the humanization of the process, since it is more likely to get a reduced interest rate if the lender is an individual that is a company.
  • Payroll advance. in the event that we do not have liquidity at the end of the month, one of the solutions that does not require applying for excessively large loans is usually payroll advances. They are granted by entities, especially customers with accounts that already allow it or by negotiating with the bank itself to try to reach an agreement on the amount and the return period.

As we can see, there are many options to get money, either through a bank or other external companies, but we must take into account the risks and benefits that each involves. For example, if we need an urgent loan to cover holes of a small amount, we will be interested in a mini credit. On the other hand, if we are considering changing cars or refurbishing our house, a personal loan is the best option.

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